Majority of UK’s dairy products may be imported by 2030

If UK milk production continues to decline at the current rate, more than half (53%) of the nation’s dairy products will be imported by 2030, according to a new report from DairyCo.

With increasing numbers of farmers scaling back expansion plans or exiting the industry, UK milk production has this year fallen 3% to 12.8bn litres - its lowest level in almost 40 years, and could plummet to just 7.5bn litres in 2030 unless confidence improves, warns DairyCo.
While dairy prices had improved in 2007/8, returns from dairy commodity markets started decreasing rapidly again in late 2008 as global supply caught back up with and then outstripped demand as key exporters, such as the US, upped output. The problem has been exacerbated further by falling consumer demand owing to the changing economic climate.
According to DairyCo’s latest survey of 1,000 UK dairy farmers, the number intending to increase production has slumped to just 18% - the lowest recorded figure in the six years the survey has been in operation.
“This survey appears to confirm industry concerns that we may be at an important point in determining the long-term future of a sustainable British dairy supply chain with 14% of respondents stating they will leave the industry within two years and only 18% having the confidence to expand,” says the report.
While the survey was only indicative of stated intention rather than actual behaviour, “past surveys have been relatively accurate at predicting future milk production”, it noted.
If the decline were not arrested, it would “have a knock-on effect of destabilising British dairy processing - probably leading to a lack of investment in the industry going forward”, predicted the report.
Meanwhile, imports were on the increase: “Comparing the UK balance of trade in 2007 with 1997, shows that in the 10-year period, the UK has moved from the position of a net exporter of dairy products, exporting 367M litres more than it imported, to the position of a net importer of dairy products, importing 1,126M litres more than it exports.”
Dairy processors meanwhile had been hit by weak prices for whey (a by-product of cheese production) and bulk cream (a by-product of producing skimmed and semi-skimmed milk).
“The low returns from selling whey powder, when added to the low gross margins from processing Cheddar, are likely to have resulted in considerably lower overall margins for cheese producers in 2008/09,” according to the report. Meanwhile, sharp falls in bulk cream prices were “likely to have put liquid milk processors’ margins under severe pressure”